Investor Presentation. Medallion Financial Corp. January 2019

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1 Investor Presentation Medallion Financial Corp. January 2019

2 Disclaimers This presentation may contain certain forward-looking statements, including statements with regard to the future performance of Medallion Financial Corp. ( Medallion Financial Corp., MFIN or Company ). Words such as believes, expects, projects, anticipates and future or similar expressions are intended to identify forward-looking statements. These forward-looking statements are based on information available to us at the time of this presentation and are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results to differ materially from those projected in these forward-looking statements, including but not limited to: our future operating results; our business prospects and the prospects of our portfolio companies; the impact of investments that we expect to make; our contractual arrangements and relationships with third parties; the dependence of our future success on the general economy and its impact on the industries in which we invest; the ability of our portfolio companies to achieve their objectives; our expected financings and investments; the adequacy of our cash resources and working capital; the timing of cash flows, if any, from the operations of our portfolio companies; the adequacy of our internal controls; and the presentation of our financial statements. These and other factors are identified in the from time to time in Medallion Financial Corp. s filings with the Securities and Exchange Commission. Medallion Financial Corp. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. This presentation is neither an offer to sell nor a solicitation of an offer to purchase securities of Medallion Financial Corp. Such an offer or solicitation can only be made by way of a Company prospectus and otherwise in accordance with applicable securities laws. The summary descriptions and other information included herein and any other materials provided to you by the Company or its representatives are intended only for informational purposes and convenient reference. The information contained herein is not intended to provide, and should not be relied upon for, accounting, legal or tax advice or investment recommendations. Before making an investment decision with respect to the Company, investors are advised to carefully review an applicable prospectus to review the risk factors described therein, and to consult with their tax, financial, investment and legal advisors. These materials do not purport to be complete, and are qualified in their entirety by reference to the more detailed disclosures contained in an applicable prospectus and the Company s related documentation. No representation or warranty, express or implied, is made as to the accuracy or completeness of the information contained herein, and nothing shall be relied upon as a promise or representation as to the future performance of the Company. The market and competitive position data, including market forecasts and statistical data, used throughout this presentation was obtained from internal surveys, market research, independent consultant reports, publicly available information, governmental agencies and industry publications. Although we have no reason to believe that any of this information or these reports are inaccurate in any material respect, we have not independently verified such data. No representations are made as to the accuracy of such information. 2

3 Investment Highlights - Transformation Underway Growing consumer finance segment at Medallion Bank since 2003 Utah Industrial Bank Charter Strong underwriting in all credit cycles As of September 30, 2018: Consumer portfolio size of $742 million Additionally, sold $420 million of receivables since June 2016 at a significant premium Extremely high ROE Profitable mezzanine segment since 1998 Significantly reducing medallion exposure to concentrate on profitable segments and drive long-term value No new medallion loan originations since 2014 Successfully restructured a trust facility in November 2018 In 4Q18 the Company will eliminate more than $63.2M of medallion loans and loans in the process of foreclosure from our balance sheet along with $98.5M of debt and payables the trust owes to its lender Management team with deep credit experience 16% + insider ownership aligns management with shareholders 3

About Medallion Financial MFIN, with its wholly-owned subsidiary Medallion Bank, is a growthoriented publicly

commercial lending Total consolidated assets under management were $1.

as percentage of overall managed portfolio Since 1996, MFIN has lent more than $8 billion dollars since its initial

4 About Medallion Financial MFIN, with its wholly-owned subsidiary Medallion Bank, is a growthoriented publicly traded finance company with leading positions in niche markets including recreational/home improvement lending and commercial lending Total consolidated assets under management were $1.57 Bn as of September 30, 2018 Highly profitable consumer lending segments at Medallion Bank consistently growing as percentage of overall managed portfolio Since 1996, MFIN has lent more than $8 billion dollars since its initial public offering in 1996 Management focusing long-term efforts on growing consumer and mezzanine lending segments, while reducing medallion exposure in orderly fashion 4

5 Current Organizational Structure Medallion Financial Corp. C Corp Total Assets: $1.57B (1) Medallion Bank FDIC regulated Consumer Focus Lending Originates consumer loans Access to deposit funding Able to retain earnings in Bank AUM: $1.12B Total Consumer Loans: $742M Medallion Lending Medallion Servicing and Lending Total Net Medallion Loans: $236M Commercial Lending SBIC Mezzanine and Subordinated Debt Access to 10 year, fixed rate SBA debt Obtains warrants or equity stakes in most investments Total Net Commercial Loans: $82M (1) As of September 30,

6 Deep and Experienced Management Team Medallion Senior Management Larry D. Hall Senior Vice President And CFO (40 years) Alvin Murstein Chairman and CEO (60+ years) Andrew M. Murstein President (30+ years) Anthony Cutrone Accounting / Finance (16 years) Marisa Silverman Legal / Compliance (14 years) Tom Munson Credit / Medallion Lending (13 years) Don Poulton Consumer Lending / Medallion Bank (40+ years) Dean R. Pickerell Mezzanine Lending (39 years) Alex Arzeno Investor Relations (10 years) Trent Hudson* Finance (25+ years) Justin Haley Consumer Lending (20+ years) Steven Hannay Consumer Lending (20+ years) Steve Lewis Mezzanine Lending (30+ years) * Effective January 28,

vehicles, boats, trailers, and small-scale home improvements (historically originated medallion loans) Total assets of $1.

7 Medallion Bank Overview Bank allows Medallion to access additional leverage Portfolio Breakdown (September 30, 2018) Wholly-owned subsidiary based in Salt Lake City, Utah providing Medallion Financial with low cost funding Originates consumer loans for recreational vehicles, boats, trailers, and small-scale home improvements (historically originated medallion loans) Total assets of $1.12 billion as of September 30, 2018 Consumer Loans 81% Investment Securities 5% Medallion Loans 14% Bank has been profitable every year since it was started

8 Consumer Lending Significant Growth Driver Consumer Lending Highlights $742 MM, or 70% of Company s total net loans as of September 30, 2018 Originated by Medallion Bank Sold $98 million of loans in 2Q16, $94 million in 1Q17, $127 million in 4Q17, and $101M in 3Q18 Loans collateralized by recreational vehicles, boats, and trailers located in all 50 states, and also finances small-scale home improvements Generally fixed payment amortizing loans with a typical term of around 10 years Sourced through dealer relationships Medallion Bank Net Consumer Loan Portfolio ( $ M M ) $1,400 $1,200 $1,000 $800 $600 $400 $200 Total Additional Loans Sold Out of Portfolio to Date Consumer Loans $1,162 $1,003 $420 $799 $319 $98 $620 $473 $349 $259 $701 $684 $742 $193 Weighted average gross yield of 15.2% $ Up an annualized 22% per year since 2011, or 30% inclusive of additional loans sold out of portfolio 8 (9MO18)

9 Consumer Loan Economics 50% ROE Consumer Lending Returns on Hypothetical $10,000 loan $1,500 ($150) $1,500 Equity $8,500 Deposits $750 / $1,500 ($300) $750 ($300) 50% ROE Loan Yield Interest Costs Loan Losses Operating Expenses Pretax Profit 9

10 YE 2006 YE 2007 YE 2008 YE 2009 YE 2010 YE 2011 YE 2012 YE 2013 YE 2014 YE 2015 YE 2016 YE MO18 Consumer Lending Stable and Conservative Underwriting Managed through Great Recession and returned to pre-recession levels by end of 2011 Medallion Bank Consumer Loan Charge-offs as a Percentage of Total Portfolio 7.00% 6.00% 6.10% 5.99% 5.00% 4.67% 4.00% 3.00% 2.00% 1.00% 2.10% 3.04% Great Recession 3.06% 1.95% 2.05% 1.38% 1.72% 1.67% 1.89% 2.09% 0.00% 10

Commercial/Mezzanine Lending Commercial Lending Highlights $82 MM or 8% of Company s total net loans Floating, adjustable, and fixed-rate loans generally secured by equipment, accounts receivable,

manufacturing, business services, consumer products, technology, distribution and arts / entertainment Other Secured Commercial Loans: Origination of other secured commercial loans that are not

11 Commercial/Mezzanine Lending Commercial Lending Highlights $82 MM or 8% of Company s total net loans Floating, adjustable, and fixed-rate loans generally secured by equipment, accounts receivable, real estate, and other assets Commercial loan types consist of: Secured Mezzanine Loans: Origination of both senior and subordinated loans to businesses in a variety of industries, including: manufacturing, business services, consumer products, technology, distribution and arts / entertainment Other Secured Commercial Loans: Origination of other secured commercial loans that are not concentrated in any particular industry Minneapolis based, average deal size: $1-5M (1) ROE represents net investments after taxes or net increase in net assets resulting from operations, divided by average shareholders equity at Medallion Capital Total Net Commercial Portfolio as of September 30, 2018 Secured Mezzanine Loan 96% Glance at Year-End Medallion Capital / Mezzanine Results (mm) MO18 Equity $38.8 $41.2 $43.0M Earnings (net increase in net assets) Other Secured 4% Total Net Commercial Loans: $82 MM $8.1 $11.8 $4.3M ROE (1) 22% 30% 13.4% 11

12 Medallion Lending Managing the Portfolio Medallion Lending Highlights 22% of Company s total net loans, down from 60% five years ago Net medallion loans represent 15% of total assets Continue to reduce exposure to this segment 45% reduction of net portfolio from September 30, 2017 on a combined basis with Medallion Bank to September 30, 2018 Total net portfolio of $235.8 million as of September 30, 2018 Loans backed by medallions as collateral and personal guarantees Weighted average interest rate of 4.35% on the consolidated portfolio as of 9/30/18, down from 4.38% when combined with Medallion Bank a year ago Market Concentration (including Bank) as of Sept. 30, 2018 Market % of Portfolio New York 88% Chicago 3% Newark 8% Boston -- Cambridge -- Other 1% Total Managed Medallion Loans 100% 12

13 Long-Term Potential For Recoveries To date, Medallion has reserved for, and charged-off, over $300 million in medallion loans All loans are backed by medallions as collateral and personal guarantees Despite the recoverability of the loans, the Company has taken a conservative posture with respect to accounting for delinquent medallion loans As a result, there are currently significant potential recoveries available to Medallion Company has started to ramp up its collection efforts, and expects over time to begin gaining possession of medallions and/or collecting on personal guarantees where accounts cannot be brought current 13

14 New York City App-based Regulations - Effective August 2018 Our city is directly confronting a crisis that is driving working New Yorkers into poverty and our streets into gridlock. The unchecked growth of app-based for-hire vehicle companies has demanded action and now we have it. Mayor Bill de Blasio August 8, 2018 New York s City Council passed legislation to: Freeze new ride-hailing (and all FHV) licenses for one year while a task force determines if more needs to be done to protect drivers and passengers Allow TLC to set minimum pay standards for drivers of ride-hailing services Require companies to make up the difference between pay floor and a driver s hourly earnings incentivizing companies to keep the number of drivers down and balance the supply of ride services with demand Other cities to potentially follow suit (Chicago / Boston) Medallion support: Reduced the NYC medallion transfer tax from 5% to 0.5% Eliminated the restrictions on independent medallion ownership New capital coming into the industry Thus far in 2018, NYC taxi drivers are earning (with tips) between $19 to $21 as an average net hourly income - an MIT study in March 2018 noted Uber & Lyft drivers made a median profit, after expenses, of $8.55 to $10.00 an hour 14

15 Pro-Yellow Proposals Pending with the City Council & TLC Int. No. 304, a local law to create a task force to study taxicab medallion values Int. No. 1052, a local law in relation to benefits for taxi and for-hire vehicle drivers Int. No. 1062, a local law in relation to the risk of loss with respect to digital payments in the taxi and for-hire vehicle industries Int. No. 1068, a local law in relation to financial education for taxi and for-hire vehicle drivers Int. No. 1069, a local law, in relation to addressing the problem of medallion owner debt Int. No. 1081, a local law in relation to driver assistance centers Expanding Taxi Driver Pay Protections Allow TLC to update the per-trip Accessible Dispatch Fee payable to drivers of accessible vehicles more regularly, making it easier to increase the fees Require pro-rated leases when taxis are unavailable through no fault of the driver and allow taxi lessors to offer pro-rated leases for shifts under 12 hours Eliminate the prohibition against e-hailing yellow taxis at JFK and LaGuardia airports Require vehicle owners to compensate drivers for the cost of damage to the taxi that the driver paid to the vehicle owner when the owner was later reimbursed through a separate source Require taximeters to display the total sum of the fare at the end of trip to reduce confusion for drivers and passengers 15

16 Company Capital and Funding Sources Bank tier 1 capital leverage ratio of 15.08% as of September 30, 2018 Funding and Capital As of September 30, 2018 Liquidity Cash $ (2) Funding Balance ($MM) Rate (%) (1) Maturity Bank Loans /18 9/21 DZ Loan (3) /18 SBA Debentures /19 9/28 Unsecured Notes /21 Preferred Securities /37 Deposits /18 7/23 Other Borrowings /18 3/20 Total Borrowings $1, Total Equity (1) Weighted average contractual rate as of September 30, 2018 (2) Balance includes federal funds sold which was inclusive of $106.5 in cash proceeds from the consumer loan sale in Q (3) The DZ loan is to a trust that was established for the purpose of owning medallions loans originated by Medallion Funding LLC or others. As a result of restructuring the trust in November 2018, in the 2018 fourth quarter the Company will be able to deconsolidate the trust which will eliminate more than $63.2 million of medallion loans and loans in process of foreclosure from its balance sheet, along with $98.5 million of debt and payables the trust owes to its lender, and allow for the recapture of over $20 million in reserves associated with medallion loans that the Company is not liable for, net of the related tax and other liabilities 16

17 De-BDC Update Received Shareholder Approval On March 8, 2018, Medallion Financial Corp. announced that shareholders overwhelmingly approved the proposal authorizing the Company s Board of Directors to withdraw the Company s election to be regulated as a business development company under the Investment Company Act of 1940 ( de-bdc ) Approximately 95% were in favor of the proposal to de-bdc The Company filed the withdrawal form with the SEC on April 2, 2018 Full consolidated results were initially reported in 2Q18 earnings press release Consolidation of all of the Company s non-investment company subsidiaries, including Medallion Bank: More transparent and straightforward financial presentation Better harness the Bank s long-term earnings power Gain ability to invest additional capital to grow the Bank's portfolio and operations Become eligible to be included as a component of certain stock market indexes 17

18 Long-Term Strategy Focus on Consumer Lending, Bank and Mezzanine Segments Continue to Reduce Medallion Exposure Work to Further Simplify Company Strengthen Balance Sheet and Liquidity 18

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